View In Browser | Free Reports | Premium Services By Charles Sizemore, Chief Investment Strategist, The Freeport Society Next time you shop at Amazon or Walmart, you might be paying in a special type of crypto. Remember when I predicted that we were on the cusp of the biggest banking shakeup in decades? Well, we’re already getting a sneak peek at what that might look like. I was writing about stablecoins… and how they were poised to upend the financial system. Last week, news leaked that Walmart and Amazon – the two biggest names in retail by a country mile – are looking into launching their own stablecoins. According to a report in the Wall Street Journal last Friday, the two retail behemoths aren’t the only major players potentially jumping into the space. The major airlines are also reportedly weighing their options. This is not a gimmick. Billions of dollars are at stake. And ordinary shoppers like you and me stand to benefit. So, what exactly are stablecoins? Why are the world’s two biggest retailers looking to launch them? And why do we care? Let’s get into it. Introducing “Crypto-Dollars” Think of stablecoins as “crypto-dollars.” They’re cryptocurrencies designed for use in payments that are pegged to the U.S. dollar. Unlike Bitcoin, whose price can fluctuate wildly, stablecoins are designed to be… well… stable! Stablecoin issuers achieve this by backing their coins with a portfolio of dollars or dollar-based assets like Treasury bills or bonds. This is where the traditional financial system meets the blockchain-based world of crypto. Why are Walmart and Amazon launching their own? They’re sick of getting scalped by MasterCard, American Express, and Visa. Credit card processing fees range from 1.5% to 3.5%. Debit card swipe fees are lower. But they can still be close to 1%. Neither Walmart nor Amazon break out the exact amount they pay in swipe fees, but it’s measured in billions. Amazon does about $390 billion in online North American retail sales. Industrywide, about 70% of online sales are made by credit card with the rest spread out between debit cards and payment apps like Venmo. Assuming a 2% average credit card swipe fee, Amazon shells out something in the ballpark of $5.5 billion in credit card fees every year. Walmart’s sales are expected to be about $700 billion this year. Walmart’s in-store customers tend to rely on debit cards. Just for grins, let’s assume something in the ballpark of 50% of the company’s sales are with credit. Assuming a 2% average swipe fee, you’re looking at about $7 billion that Walmart hands over annually to payment processors. These are rough estimates. But you get the idea. Walmart and Amazon pay a lot of money to Visa and Mastercard, and those fees come out of their profits. So, these retailers have every incentive to nudge their shoppers away from plastic and onto alternatives like “Walmartcoin” or “Amazoncoin,” or whatever they end up naming their future stablecoins. And that’s not all… Recommended Link | | | | These little-known reserve accounts are all over the country. We found one of these accounts in Wyoming that’s estimated to have a value of $16.4 trillion. Another one in Texas is estimated at $1.22 trillion. One in Pennsylvania has about $2.5 trillion in reserve. Click here to see how you could tap into all this wealth. | | |
Becoming the Bank So long as interest rates are positive, issuing your own stablecoin is a profitable business. Here’s why... The T-bills or other securities that the stablecoin issuer uses as collateral pay interest… interest not generally passed on to the holders of the coin. In fact, if the GENIUS Act is passed, doing so will be illegal. It’s the bill working its way through the Senate that would create a regulatory structure for stablecoins. In short, by issuing their own coins, Walmart and Amazon can play the banker’s game of borrowing cheaply (or free in this case) and lending dearly. What This Means for Us Walmart and Amazon will incentivize us to use their stablecoins instead of swiping our credit cards. This might mean they offer a 1% discount on all purchases made with them or perhaps some sort of bonus or reward points. And why wouldn’t they? They can offer a discount and still make higher profits by avoiding the credit card swipe fees and potentially earning the interest on the coins. Of course, Visa, Mastercard, and American Express aren’t going to willingly lose market share. They’ll need to look for new ways to incentivize us to keep swiping, via reward points, airmiles, or other perks. Anything that encourages competition is good for the consumer. That’s the free market at work… and good ol’ fashioned capitalism working its magic. Walmart and Amazon are the biggest players in retails. Naturally they stand to make the biggest splash by being the first to launch stablecoins. But they won’t be the last. Already, Starbucks, McDonald’s, and other restaurant chains offer rewards programs via their apps. Order enough on their apps, and you might get a free latte or Egg McMuffin. Imagine how much juicier the rewards could be if they were also making money on Starbuckscoin or McDonaldscoin. We won’t have to imagine for long. The GENIUS Act is tentatively scheduled for a full Senate vote on Tuesday, June 17. Assuming it passes (and there is very little opposition to it), it will be the House of Representatives turn to review it. If there are no major distractions, it may end up on the President’s desk for signature by the middle of the summer. Change is coming… and fast. We’re about to see some real competition in the financial world for the first time in decades… if not centuries. And this gets us one step closer to a world in which you can be free of a manipulated and corrupt banking system. This is also great news for Bitcoin holders. The more mainstream we see cryptocurrencies go, the more the bullish case for Bitcoin as a long-term asset class is vindicated. I recommended Bitcoin to my Freeport Investor readers in December 2023, and the price is already up 155%. I have no plans to sell any time soon. | 